Describe causal ambiguity and provide an example of how it can act as a barrier against imitation of a firm's valuable resources.
What will be an ideal response?
Student examples will vary. A sample answer follows:
Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent. Ray-Ban sunglasses, for example, have been a leading brand of eyewear since the 1930s. Although the company has countless imitators and stiff competition in the luxury eyewear market, it has retained its leadership position for most of its existence. Ray-Ban's iconic designs and commitment to high-quality materials are certainly contributing factors, but it remains unclear why consumers continue to prefer Ray-Bans to other brands offering similar styles and materials. This ambiguity makes it exceedingly difficult for other firms to capture part of Ray-Ban's market share.
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Although the general rule for transfer prices is the outlay cost plus opportunity cost, many companies instead use negotiated prices to price their goods and services. When are negotiated transfer prices used? Are such prices consistent or inconsistent with responsibility accounting? Explain.
What will be an ideal response?
Brent and Leigh have been haggling for a long time. Brent agrees to let Leigh have a small percentage off the price, but she does not feel it is enough. Eventually, they both give up something in order to agree on a price, but neither is satisfied with the outcome. This scenario illustrates which concept below?
A. distributive bargaining B. competitive bargaining C. compromise bargaining D. integrative bargaining
The direct method separately lists operating cash receipts, such as cash received from customers.
Answer the following statement true (T) or false (F)
Outsourcing strategies
A. increase a company's risk exposure to changing technology and/or changing buyer preferences. B. are nearly always a more attractive strategic option than merger and acquisition strategies. C. carry the substantial risk of making a company overly dependent on its suppliers. D. involve farming out value chain activities presently performed in-house to outside specialists and strategic allies. E. carry the substantial risk of raising a company's costs.